This paper finds that, on average, targets that terminate takeover offers significantly increase their leverage ratios. Targets
that increase their leverage ratios the most reduce capital expenditures, sell assets, reduce employment, increase focus,
and realize cash flows and share prices that outperform their benchmarks in the five years following the failed takeover.
Our evidence suggests that leverage‐increasing targets act in the interests of shareholders when they terminate takeover offers
and that higher leverage helps firms remain independent not because it entrenches managers, but because it commits managers
to making the improvements that would be made by potential raiders.